Interview: the middle link

“We have a memorandum of understanding with Westinghouse, along with BAE and Rolls Royce. We are working with them to help them get a price to deliver an AP1000 for the UK. It's fairly broad in scope and obviously a preliminary document; as time goes on and as the contractual arrangements are finalised it will narrow down and become more specific. Of course Westinghouse doesn't have a client for the AP1000 yet, although it is talking to RWE and E.ON about an AP1000 at its Wylfa site.

We have been helping Westinghouse with prices and looking at some of the programme issues. Westinghouse needs to know the budget price of the AP1000 with components manufactured in the UK; they need to understand one, can we manufacture, and two, will it be competitive in world pricing terms.

Q: Which bits might you supply?

We haven't addressed splitting the work. BAE is more suited to large structural modules. Doosan is more in mechanical modules, things like valves and pipe work, which are smaller and more complicated, where the quality requirements are higher. We have a dock, we could build large structures, but our skills are better suited to smaller, safety-critical modules. Rolls-Royce has that as well, there is some overlap. But there is going to be enough work for everyone.

Q: And there is space for an EPC contractor?

Westinghouse and RWE/E.ON have to select someone as a lead constructor or AE. There is a fundamental difference between them and EDF, which will work as its own AE. The Lead Constructor/Architect Engineer will place contracts into the supply chain; I am pretty sure that the lead constructor/architect engineer organisation will work closely with Westinghouse and RWE/E.ON. Westinghouse will procure the NSSS and some safety-critical modules. The AE may procure other things like structural components. A lot of that still has to be decided; it depends on the capability of the AE eventually chosen.

Q: What about the EPR?

We have been talking to Areva and EDF. Areva will require its NSSS system to be installed, and has been fairly well commented by Areva, it doesn’t have a UK site installation capability. If Areva is responsible for installing NSSS, we would be looking to install that for them. Also obviously tanks and heat exchangers in safety rooms would come under EDF's direct control. At the EDF suppliers' day in June, EDF put up a slide showing them as AE, and they need to fill in the other boxes, such as turbine supplier; M&E is another one of those boxes. EDF is focused at the moment with finding a civil contractor and is going to the market for that role.

We are focused immediately on the UK, which is likely to be the first European Nuclear New Build, and on the supply chain development in the UK for component manufacture for the AP1000 and EPR, and we would hope to use that in Europe as well. This is broader than just the UK.

Q: There has not been any new-build in the UK for ages; what have you been working on?

We started building components for Chapelcross in 1947, and have really been involved in all AGRs, and we manufactured the steam generators under licence from Westinghouse for Sizewell-B. Then there was no more new construction, so we have been supporting Magnox reactors and British Energy. We were involved in three of the major repairs to the primary circuit of Magnox stations and the AGRs; those were groundbreaking repairs. That gave us continuing expertise in high-integrity inspection and repair. In recent years, we have won new-build contracts at Sellafield, and new facilities for reprocessing waste. We won the REF project, worth GBP80m, to clean waste flasks before they return to their country of origin. We won the SPP1, the sludge storage facility, with some high-integrity and very large tanks - some are 33m long. And we are the prime contractor in the separation area ventilation project, worth GBP80m. In recent years, we have done about GBP300m of nuclear new-build work at Sellafield. We are the only contractor at Sellafield with three EPC contracts going on concurrently. We have a continual engagement in the high-integrity end of nuclear work.

The important thing this has allowed us to do is develop our supply chain; we have an extensive chain now of companies we have brought up to speed, companies that were not in the nuclear business, and we are bringing up to work to nuclear standards, which is very important. It is crucial going forward that we will have to do this for many more companies to meet nuclear new-build requirements.

Q: How will you do this?

We will enlarge our supply chain. We have a 10-year plan for resources, and we are taking on about 50 graduates and 75 apprentices each year. This is one of the biggest intakes in the engineering sector in the UK and puts graduates and apprentices in training schemes giving them nuclear experience. Our long-term resource plan allows us to develop these. Linked in to this are significant contracts in Sellafield in the future, and over the next five years, allow us to develop our skills in nuclear new build.

Q: But isn't there a lot of risk here, when you are not sure of the future of the business?

You have to set out your business plan, and say, this is the marketplace, you are going to be a major player, and set out your objectives and your resource requirements. We review our business plans every six months. If we saw that new-build project was weakening, or being delayed, we would factor that into the plan. It's what we have been doing for the last 50 years.

Q: You are really working 10 years ahead?

I am starting to develop a resource histogram for up to 2020 for the first tranche of nuclear new-build. That will feed into the company resource plan. That's what the UK business opportunities postulate as being at the moment. If things drift back, I will adjust them. We won't stop taking on the number of graduates and apprentices we have got. Our parent Doosan is very supportive.

Q: How does the training programme work?

We have a training facility at Tipton, where we are training all the welders, fitters and riggers. They have a session at the facility, then they are put out in the field for practical work, and then they come back. How long it lasts depends on their skills. We have a graduate programme that lasts two years. There we put people around different departments within the office, and make sure that they have the opportunity to go to a range of nuclear, thermal and petrochemical sites. If these guys are going to be designing plant, they need to understand the site dynamics, and that they can't be late with their design. They have to design something that can be installed in a risk-free manner. It's all accredited by the Institute of Mechanical Engineers; it's an approved graduate scheme, so that at the end they get a chartership. That is very important. If we have a certain amount of chartered engineers, that is key for a company that designs nuclear equipment. Sellafield, for example, require chartered engineers for key positions on projects. Before we let anyone design nuclear equipment, we assess them; do you have the right background to do that work, to be a lead design engineer?

Q: The UK hasn't had the best nuclear history, compared to say France; some of the contractors weren't the strongest. What will be different this time?

We developed technology in the AGR that was very challenging. In the plant there were a lot of degradation mechanisms, potential creep, fatigue mechanisms. They were difficult plants to design and maintain, but that being said, EdF/British Energy have been able to extend life of those reactors; it also costs to extend PWRs' life with replacement components. Now that we have the PWR experience, Sizewell B outages have decreased, and there is a favourable trend there. Look at the projects at Sellafield: there is a major concrete pour at SPP1, and that has come in ahead of schedule. Industry can do this and be successful.

It is all about choosing the right companies to be involved, and Tier 2 contractors like ourselves have to take a significant amount of responsibility. The problem is if you take the specification from a technology vendor, and take the code requirements, and throw them at the supply chain, Tier 3 and 4 suppliers don't have the skills to interpret the requirements. We have a key role to play in developing component-specific specifications that Tier 3 and 4 companies can understand. That is the key to getting the right quality.

I gave a presentation at the Nuclear Industry Association's SC@Nuclear conference that highlighted to Tier 3 and 4 vendors how we saw this being done, how companies like us can go from the technology provider and high-level specifications down to the detail level specifications to make a vessel or tank, interpret the codes, interpret the specifications, and give the supply chain a clear, well-defined scope and specification to work to. By doing that, there is a much better chance to be successful. That's the approach we have adopted with new build at Sellafield.

Q: What are your skills requirements for your employees?

Understanding of codes and specifications, and having a nuclear culture, are most important. If you don't understand what it means to have a nuclear culture, it is very difficult. You have to know: it is right the first time, it is the right quality, and you have to have openness. You have to recognise that if you make a mistake, you need to be strong enough to hold your hand up and say sorry, how can we work together to fix this. Everyone is fallible. We are working very hard with the skills and structure of people in terms of developing openness and improvement in performance, we are saying to people, you have got to follow processes and procedures, and accidents/mistakes happen when things are built to the wrong quality levels, when people take shortcuts.

We need good mechanical and electrical engineers. We don't need nuclear physicists and scientists. The technology has been developed. We need good engineers coming out with good degrees, and an understanding of engineering. We take them and train them and give them experience and teach them what it means to work in the nuclear industry so that they can understand the impact of what they are doing, understand that a vessel is an integral part of site safety, so getting it to the right code, to the right thickness, is crucially important to the integrity of the plant and the future of the nuclear industry – no one wants another incident. We are encouraging them to be open, we won't shoot them if they make a mistake, they have got to be open, and learn and improve, and learn so they won't make the same mistake again. We've got many years working on utilities, and for Magnox and BE, and have been exposed to the NII and third-party assessors, and we have a history to draw on and give people real experience of how it is done.

Q: Are you top-heavy with senior people?

A few years ago we were top heavy, but the recent recruitment drive of the last few years has given us a good spread in engineers, and we are working hard in the apprentices at the site end of the business to improve our age profile.

Q: I would have thought the toughest bit would have been middle-aged people, because no one would have been interested in going into nuclear 10 years ago.

We are multidisciplinary business: thermal power, oil and gas, petrochemical. Not all of those sectors will be depressed at any one time. If you look at our history, we pick people to move from one industry to another. We don't have people working 100% of their time on nuclear. And a quality weld on a high temperature, high-pressure header, a petrochemical weld, or a nuclear power station weld, all need to be exceptionally good; the main difference is in the amount of inspection and back-up paperwork. A quality welder will produce a defect-free weld in all these cases. From the site end of it, the main difference is not fitters or the welders, it's in the paperwork; the site staff need the extra nuclear skills.

Q: How important is manufacturing to you in nuclear new build?

We will do a make-or-buy-type decision. We would like to be responsible for manufacturing significant parts of the EPR, and supplying significant parts of the AP1000. We won't necessarily manufacture all of those parts in Renfrew [Scotland, its headquarters]. We will do a make-or-buy decision. This is where the supply chain is important, and we hope to bring it with us. Typically we subcontract 50% of our turnover.

We look at the complexity of components. If we said a component is a simple vessel, there are quite a few companies in the UK marketplace that can make vessels. They may not be working in the nuclear industry today, but if you take these companies and help them with their processes and procedures, once those are put in place, they can use their facility to do welding, bending plates and performing radiographic inspections. There may be other components, modules, which are more safety-critical, in which we need a greater level of quality input, and we will make them in Renfrew. Other components, such as the containment vessel of the AP1000, we will have to buy preformed rolled steel plates, and assemble them on-site. In that case, we will buy plates preformed and rolled, and do assembly on site. For each company, we will assess what they are best suited to make.

We are doing a lot of work on the supply chain through the NIA, going around the country talking to Tier 3 and 4 companies on quality arrangements, helping them understand work in the nuclear business. It has given them a taste of the business that could be there for them. On the EPR, there are 50 heat exchangers and pressure vessels per reactor. For four reactors that EDF is committing to in the first stage, there will be 200 vessels and heat exchangers. There is no reason why they could not be competitively sourced from the UK, provided that we could get contracts placed in advance, and say to the supply chain, we have contracts, are you ready to deliver them?

Q: Might it not be less expensive to source them from manufacturers elsewhere, such as the USA?

We could go outside the UK, to buy components from the USA, but they will be building their own fleets, and have their own constraints in the supply chain. We do intend to develop our business, and our supply chain business, to suit the global requirements of people like Westinghouse and Areva. We have talked to both. With Westinghouse, we have talked about supplying for the European ambitions of their AP1000; with Areva, which is a global supplier, and they need to expand their supply base. Of course we have to be competitive in winning those contracts.

What they have said to us is two things: quality and security of delivery. We have to have ISO 9001-type processes and management, health and safety and a proven delivery track record. In terms of security of delivery, Areva and Westinghouse are focusing on project management; can you manage your own work to deliver it on cost and time and manage your supply chain? Companies with those attributes will be successful. Being successful in the UK gives a stepping-stone to go on from the UK. Hopefully after China and the USA, the UK will have the third major tranche in new nuclear development.